This could be the ultimate in finance lobby chutzpah:

Treasury Secretary Timothy Geithner’s potential departure is highlighting how much Wall Street’s reputation might have recovered from the financial crisis — and sparking chatter that one of their own could take his place […]

If Geithner does decide to leave the administration, one big question will be whether a Wall Street figure would be in the mix to replace him. His predecessor in the George W. Bush administration, Hank Paulson, was the chairman and chief executive of Goldman Sachs before becoming Treasury secretary. His Wall Street experience was widely credited with helping him steer the country through the financial crisis.

A year and a half ago, a nominee with extensive financial ties would have stirred public backlash, according to Brian Gardner of Keefe, Bruyette & Woods. But he said one could look no further than the White House for proof that public anger at Wall Street is waning.

Following the departure of his original chief of staff, Rahm Emanuel, President Obama reached right to Wall Street to pull out William Daley from JPMorgan Chase & Co., who also served as Commerce secretary under President Clinton.

“That’s an indication that somebody with a Wall Street background is no longer persona non grata,” said Gardner.

Really? There was a moment in the history of the Obama Administration where a Wall Street background was a dealbreaker? When? Geithner may not have actually worked for Goldman Sachs, he was only running the New York Fed when they delivered a sweetheart deal to Goldman on AIG counter-party payments. So the idea that once Geithner leaves, then Wall Street can install their guy at Treasury is pretty laughable.

Then there’s the assumption that a change in leadership at Treasury could possibly make public policy at all friendlier to Wall Street. Let’s take a look at the facts. Wall Street has returned to profitability from the financial crisis faster than anyone thought possible. They did it with virtually the same staffs, as their firms were not nationalized, nor were their top managers sacked in exchange for a federal rescue. The biggest banks are now bigger than they ever were before the crisis, and they control over 70% of all funds and 96% of the derivatives market. The government subsidizes the banks through monetary policy, and has basically sheltered them from their own excesses and allowed them to nurse themselves back to health with public dollars. The Federal Reserve even provides interest payments on the banks’ “excess reserves,” giving them a premium to park their money.

In fact, this is part of a larger corporate hegemony over the political system. Corporate earnings are way up even while 14 million Americans are out of work, and CEO pay jumped 23% last year while average wages didn’t move. We’re in an age of corporatized politics, and the idea that somehow Wall Street needs to gain a foothold at the Treasury Department to put public policy on a respectable path should be treated with the same indignant reaction that Wall Street typically gives to anyone who threatens their dominance.

As Frank Rich said in his well-regarded piece, the original sin of the Administration was to let the banksters off the hook for the damage they caused. This has only emboldened them to exert more influence over the political system and break off more of the federal Treasury for themselves. Now they want the seat of power, too. As if they didn’t have it already.

David Dayen

David Dayen

60 Comments